Chinese Stock Market Slumped Over 6%

China’s benchmark index tumbled over 6% Tuesday, after Monday a renewed plunge in oil prices kept investors stay away from the global market. The Shanghai composite index dived 6.4% to 2749.79 which is the lowest close since Dec.1, 2014.

The other Asian markets also decreased on Tuesday. Japan’s Nikkei Stock Average fell 2.3%, and Hong Kong’s Hang Seng Index declined 2.5%. However, U.S. shares rebounded, with the Dow Jones Industrial Average up 1.52% to 16,126.49 during Tuesday trading.

The Shanghai market has now lost approximately half its value since last summer. The swift descent has more than wiped out an equally sharp rise in the first half of 2015 that was fueled by Chinese investors who piled up debt to buy shares under government encouragement at that time.

“The backdrop of all this is the fact that economic fundamentals remain pretty weak and the overall downward trend of the market looks intact,” said Deng Wenyuan, an analyst from Soochow Securities.

Even China’s share ownership isn’t widespread, the bear market has complicated Beijing’s effort to transfer its economy away from investment and exports to a more sustainable growth which led by consumption.

However, investors in China were almost all panic in the shift of government policies and economic fundamentals, said by Chen Yong, market strategist for Lianxun Securities. The approach of the Lunar New Year didn’t help, as players become wary to invest for fear of any unexpected sharp falls in overseas markets.

Michael Every, who heads Financial Markets Research, Asia-Pacific, at Rabobank, said: "It’s just another in a long series of slumps that we have seen in this market, and it’s not the last we will see either because the market is still overpriced. And too many people want to get their money out. It’s been a bubble since it began last summer.”

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